Lunch & LearnAugust 12, 2020

Procurement Liquidation Issues

• The objective of the session to help develop an understanding of what caused liquidation issues in FY20 and the steps that have been taken to reduce risk in FY21.

• Through this knowledge transfer, ERP team members will be able to assist end users in looking for liquidation issues.

• This foundation of cross-functional knowledge will also provide campus users with knowledge to recognize and resolve liquidation issues as they occur.

Liquidation Issues

• Liquidation issue definition• Lessons learned• Business Process Overview• Commitment Liquidation Issues• Obligation Liquidation Issues • Examples• Reports• Questions

Agenda

Liquidation Issue

Liquidation issues on procurement transactions occur when debit and credit entries on the ledger do not match for a single transaction.

1. There are many reasons for liquidation issues

2. Commitment (requisition) liquidation issues are different than obligation (purchase order) liquidation issues

3. Resolving liquidation issues takes practice and patience

Lessons Learned

• Commitment is the term Workday uses when it “reserves” money on a requisition. The reserve stays in place until the purchase order creates the obligation.

• Obligation is the term Workday uses when it “holds” money on a purchase order. The hold (previously referred to encumbrance) allows Workday to identify money used to complete the payment to the supplier.

Vocabulary

Transaction status tells the user where the transaction is within business process.

• Draft – transaction started, but not submitted• In Progress – transaction working through the business process, but

not complete• Successfully Completed – transaction complete for requisition• Approved – transaction approved • Issued – transaction issued (purchase order dispatched)

Transaction Status

Business Process

Requisition Entered in Workday

Budget CheckCreates

Commitment

Requisition Successfully Completed

Draft Purchase Order Created

Purchase Order

Approved

Purchase Order Issued

Purchase Order

Dispatched to Supplier

Goods/Services Received

Supplier Invoice

Approved

Supplier Invoice Created

Budget Check Creates

Obligation

When Applicable

Receipt Completed

Obligation Liquidated

Supplier Invoice Paid

Purchase Order Closed

Reasons for Liquidation Issues

Workflow routes requisitions to buyers for approval. There are times when a buyer is required to update the amount on the requisition line. This may occur because there is a price discrepancy or the buyer is able to negotiate a different price or updates are required after a bidding process.

There was not a budget check step after the buyer’s approval.

Commitment Issue – Requisition Budget Check FY20

FY20 ISSUERQ Initiated in

WorkdayBudget Check

Creates Commitment

RQ Initiated in Workday

Budget CheckUpdates

Commitment

Cost Center Manager Approval

RQ Initiated in Workday

Driver Worktag ManagerApproval

BuyerApproves

Requisition

Requisition Successfully Completed

Commitment Issue – Requisition Budget Check FY21

The business process was updated to include a new budget check step after the buyer’s approval. This budget check step will eliminate commitment errors that were caused by the buyer updating pricing on requisitions.

NEW IN FY21RQ Initiated in Workday

Budget CheckCreates

Commitment

RQ Initiated in Workday

Budget CheckUpdates

Commitment

Cost Center Manager Approval

RQ Initiated in Workday

Driver Worktag ManagerApproval

BuyerApproves

Requisition

Requisition Successfully Completed

Budget CheckUpdates

Commitment

Commitment Issue – Requisition, PO Canceled FY20

FY20 ISSUE

The difference between purchase order cancel and purchase order close was not well defined. Purchase orders were canceled when they should have been closed.

Canceling a purchase order that has been approved and/or issues caused the link between the requisition and the purchase order to be broken. When the link was broken a commitment liquidation error occurred.

Requisition Entered in Workday

Budget CheckCreates

Commitment

Requisition Successfully Completed

Purchase Order

Dispatched to Supplier

Purchase Order

Approved

Purchase Order

Dispatched to Supplier

Purchase Order Issued

Budget Check Creates

Obligation

Purchase Order

Canceled

Commitment Issue – Requisition, PO Canceled FY21

Re-training occurred in the fall of 2020 to teach buyers when to use cancel and close.

• Cancel if the purchase order has a status of draft. (Canceled purchase order cannot be re-opened.)

• Close if the purchase order has a status of approved or issued. (Closed purchase orders may be re-opened)

• New role created to limit the number of buyers that have the ability to cancel purchase orders

NEW IN FY21Requisition Entered in Workday

Budget CheckCreates

Commitment

Requisition Successfully Completed

Purchase Order

Dispatched to Supplier

Purchase Order

Approved

Purchase Order

Dispatched to Supplier

Purchase Order Issued

Budget Check Creates

Obligation

Purchase Order Close

Obligation Issue – Receipt in Draft Status

ISSUE

When a purchase order has a receipt with a status of draft there will be a liquidation issue.

Receipts with draft status must be completed or canceled before the purchase order will fully liquidated.

The Find Receipts - CR report is helpful when looking for receipts status.

Purchase Order Issued

Goods/Services Received

When Applicable Receipt(s) Completed

Receipt(s)With Status of

Draft

Supplier Invoice Created

Purchase Order

CANNOTbe Closed

Supplier Invoice Paid

Supplier Invoice

Approved

Obligation CANNOTLiquidated

Find Receipts - CR

Purchase Order

QTY Description Unit Unit Cost Line Total

10 Microscopes Each $ 1,500 $ 15,00025 Slides Sets Boxes $ 250 $ 6,250

Supplier Invoice

QTY Description Unit Unit Cost Line Total

8 Widget Each $ 1,500 $ 12,00015 Assemblies Each $ 250 $ 3,750

Price Change on Supplier Invoice (Less)

7/1 – PO created

7/15 – goods received

7/20 – receipt created. User checked fully receive box on receipt, but all goods were not received.

7/21 – supplier invoice created in Workday

7/21 – there is not a three-way match. Purchase order has a match exception.

7/25 – requisition initiator cancels receipt created on 7/20, then creates a NEW receipt for the correct amount.

7/25 – supplier invoice approved and scheduled for payment

Obligation Issue – Supplier Invoice not CompleteISSUE

When a purchase order has a supplier invoice that has a status of anything other than approved or paid there could be potential liquidation issues.

The Find Supplier Invoices - CR report is helpful when looking for supplier invoice status.

Purchase Order Issued

GoodsReceived

Supplier Invoice Created

Supplier Invoice with

StatusDraft

Supplier Invoice with

StatusCanceled

Supplier Invoice with

Match Exception

Potential causes for liquidation issues

Find Supplier Invoice for Campus - GTCR

Legacy purchase orders are purchase order that were converted from the legacy system (PeopleSoft)

Legacy purchase orders• Must be received centrally• May have change orders done to add funds ONLY when there is an increase

required to pay a supplier invoice• Must be closed as soon as the final invoice is paid

Legacy Purchase Orders

Budget Reference BR20

Line # Description Amount1 Consulting Services $15,000

Change Order

Line # Description Amount BR1 Consulting Services $ 15,000 BR202 New line for payment

of supplier invoice$ 3,000 BR21

Prior Year Purchase Order/Change Order

7/20 – suppler invoice entered in Workday. Supplier invoice = $18,000

• Supplier invoice exceeds tolerance • Change order required

5/25/20 – PO issued to supplier

7/25 – change order completed

• New line added to PO to add money from BR21

7/26 – supplier invoice approved & paid

Optional – department requests PO to be closed

Purchase Order ≠ Supplier Invoice

ISSUE

When a purchase order line amount is greater than/less than the purchase order line amount liquidation issues may occur.

Purchase Order Issued

Goods/Services Received

When Applicable Receipt(s) Completed

Supplier Invoice Created

Supplier Invoice Line Amount is

Different than Amount on PO

Purchase Order Closed

Supplier Invoice Paid

Supplier Invoice

Approved

Obligation Liquidated

Purchase Order

QTY Description Unit Unit Cost Line Total

250 Widget Each $ 15.00 $ 3,750.00250 Assemblies Each $ 2.50 $ 500.00

Supplier Invoice

QTY Description Unit Unit Cost Line Total

250 Widget Each $ 10.00 $ 2,500.00250 Assemblies Each $1.00 $ 250.00

Price Change on Supplier Invoice (Less)

7/1 – PO created

7/15 – goods received

7/20 – receipt created in Workday

7/21 –

7/21 – supplier invoice created with price discount on each line. Supplier invoice approved & scheduled by Accounts Payable.

7/30 – supplier invoice paid

8/3 – department makes request to close purchase order. Remaining balance on purchase order will liquidate.

Purchase Order

QTY Description Unit Unit Cost Line Total

250 Widget Each $ 15.00 $ 3,750.00250 Assemblies Each $ 2.50 $ 500.00

Supplier Invoice

QTY Description Unit Unit Cost Line Total

250 Widget Each $ 20.00 $ 5,000.00250 Assemblies Each $3.00 $ 750.00

Price Change on Supplier Invoice (More)

7/1 – PO created

7/15 – goods received

7/20 – receipt created in Workday

7/21 – supplier invoice received. Price increase on each line. Changes are greater than tolerance.

7/21 – requisition initiator & cost center manager notified that change order is required.

7/25 – change order completed

7/30 – supplier invoice created, approved and scheduled for payment.

Supplier Invoice

QTY Description Unit Unit Cost Line Total

250 Widget Each $ 20.00 $ 5,000.00250 Assemblies Each $3.00 $ 750.00

Enter a ServiceNow ticket when you want to make a request to close purchase orders

• Use the Find Purchase Order report to search for purchase orders by worktags or cost centers

• Download Excel spread sheet of report• Add a column to identify purchase orders to be closed• Attach spread sheet to ServiceNow ticket

Process for Closing Purchase Orders

There are a few line level reports that are helpful in evaluating liquidation errors:

• Requisition Line Commitment Report - CR• Requisition Line Commitment Report for Campus - CR• Purchase Order Line Obligation Report – CR• Purchase Order Line Obligation Report for Campus – CR• Find Journal Lines - CR• Find Receipts – CR • Find Supplier Invoices – CR

Are there reports to help?

• Requisition• Request Non-Catalog Items• Request Catalog Items• Create from My Procurement Favorites• Create from Templates and Other Requisitions

• Receipt• Find Supplier Invoice for Campus• Close Open Purchase Purchase Order• Requisition and Purchase Order Status Definitions

Job Aids

Questions